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Bar Stool Economics

Discussion in 'Uncategorized Threads' started by mercedesman1981, Jul 23, 2008.

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  1. mercedesman1981

    mercedesman1981 TS Member

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    Our Tax System Explained: Bar Stool Economics

    Suppose that every day, ten men go out for beer and the bill for all ten
    comes to $100. If they paid their bill the way we pay our taxes, it would go
    something like this:

    The first four men (the poorest) would pay nothing.
    The fifth would pay $1.
    The sixth would pay $3.
    The seventh would pay $7.
    The eighth would pay $12.
    The ninth would pay $18.
    The tenth man (the richest) would pay $59.

    So, that's what they decided to do.

    The ten men drank in the bar every day and seemed quite happy with the
    arrangement, until one day, the owner threw them a curve. 'Since you are all
    such good customers,' he said, 'I'm going to reduce the cost of your daily beer
    by $20.' Drinks for the ten now cost just $80.

    The group still wanted to pay their bill the way we pay our taxes so the
    first four men were unaffected. They would still drink for free.

    But what about the other six men - the paying customers? How could they
    divide the $20 windfall so that everyone would get his 'fair share?'

    They realized that $20 divided by six is $3.33. But if they subtracted
    that from everybody's share, then the fifth man and the sixth man would each end
    up being paid to drink his beer. So, the bar owner suggested that it would be
    fair to reduce each man's bill by roughly the same amount, and he proceeded to
    work out the amounts each should pay.

    And so:

    The fifth man, like the first four, now paid nothing (100% savings).
    The sixth now paid $2 instead of $3 (33%savings).
    The seventh now pay $5 instead of $7 (28%savings).
    The eighth now paid $9 instead of $12 (25% savings).
    The ninth now paid $14 instead of $18 (22% savings).
    The tenth now paid $49 instead of $59 (16% savings).

    Each of the six was better off than before. And the first four continued
    to drink for free. But once outside the restaurant, the men began to compare
    their savings.

    'I only got a dollar out of the $20,'declared the sixth man. He pointed
    to the tenth man,' but he got $10!'

    'Yeah, that's right,' exclaimed the fifth man. 'I only saved a dollar,
    too. It's unfair that he got ten times more than I got'

    'That's true!!' shouted the seventh man. 'Why should he get $10 back
    when I got only two? The wealthy get all the breaks!'

    'Wait a minute,' yelled the first four men in unison. 'We didn't get
    anything at all. The system exploits the poor!'

    The nine men surrounded the tenth and beat him up.

    The next night the tenth man didn't show up for drinks so the nine sat
    down and had beers without him. But when it came time to pay the bill, they
    discovered something important. They didn't have enough money between all of
    them for even half of the bill!

    And that, ladies and gentlemen, journalists and college professors, is
    how our tax system works. The people who pay the highest taxes get the most
    benefit from a tax reduction. Tax them too much, attack them for being wealthy,
    and they just may not show up anymore. In fact, they might start drinking
    overseas where the atmosphere is somewhat friendlier.

    David R. Kamerschen, Ph.D.
    Professor of Economics
    University of Georgia

    For those who understand, no explanation is needed.
    For those who do not understand, no explanation is possible.
     
  2. timb99

    timb99 Well-Known Member

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    "...they might start drinking overseas where the atmosphere is somewhat friendlier..."

    Exactly where would that be?
     
  3. School Teacher

    School Teacher Well-Known Member

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    I simply do not understand how Obama plans to give the majority of taxpayers a refund, allow those making $50,000 or less to pay no tax and to pay for this by increasing the tax on a few high earners.

    Ed Ward
     
  4. spitter

    spitter Well-Known Member TS Supporters

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    "A dollar paid in the future is worth less than one paid today..."

    Works for me!

    Jay
     
  5. School Teacher

    School Teacher Well-Known Member

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    2str8:

    I would suggest that the problem lies not with tax cuts but with excessive expenditure. That said, how do you feel about the Democrats push for national health insurance including illegal aliens?


    IMO, increasing taxes on productive people discourages incentive. Why work harder if the government is going to take more of your earnings?


    Iraq has been expensive and now, with a favorable end in sight, Obama wants a timetable for withdrawal. The Iranians are simply waiting their time. They are great chess players, after all, they invented the game. As we reduce our presence, the Iranians will step into the vacuum and convert Iraq to a Shiite based Islamic theocracy. Then, we will either have to go back in or allow Iran to control Iraq.


    It has been an expensive effort, both in lives and money, but we must finish the job of creating a stable, democratic Iraq. We also must reduce government expenditures.


    Most business that I am aware of have eliminated layer upon layer of middle management. When I retired in 2002, I was responsible for three functions that did more work with two less managers. It was a struggle but the pay was good. Back in the 1980’s, I had so many middle managers reporting to me that all I did was write performance appraisals. The staffing rule seemed to be one manager for every three staff. We also worked a 35 hour week. Boy, did that change.


    How much downsizing in government are you aware of? It seems that government just keeps adding programs and employees and takes in more taxes to fund these programs.


    I submit that the problem is too much expenditure, not retaining the Bush tax cuts.


    Ed Ward
     
  6. mercedesman1981

    mercedesman1981 TS Member

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    2srt8, how is the confiscation of wealth by the federal government, redistributed to the poor or those who won't work, increases the gross national product for goods and services which the national debt is measured against?

    Further, can you name any government program that is hailed as a model of efficiency? That when taken over by private enterprise, has not been more productive?

    The best contrasts I can think of is the differences between the years Carter was president and when Reagan took over.

    Your Shared Wisdom comment: instead of class envy, your personal energy spent to better yourself will pay bigger dividends.

    For myself, trapshooting has become much more expensive these past few months compounded by the fact I often pay for two. So instead of feeling sorry for myself and shooting less, I work overtime to afford to go shooting, or to be able to afford leisure time activities with my family.

    Mike
     
  7. redhawk44

    redhawk44 Member

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    The reason for a graduated income tax, is to get people to vote for politicians who promise to buy them a lunch paid for with someone elses money.

    Now, since we all know that there IS NO FREE LUNCH, and we know that rich people get their money from poor folks, how does taxing the rich to provide a government program that we don't need in the first place, make sense?

    But they have been able to sell this baloney for as long as I can remember, and I remember Franklin Rosyvelt.
     
  8. timb99

    timb99 Well-Known Member

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    Top things taxes pay for:

    Social Security

    Defense/Military

    Medicare

    Interest on the national debt

    Medicaid

    These make up almost 70% of government expenditures.

    All other government programs pale in comparison.

    We can bitch all we want about welfare, and to a large degree, justifiably, but its still a drop in the bucket compared to these.

    And for 31 out of the last 35 years, the government has spent more than it has collected in taxes.

    Its irresponsible to keep dumping our bills on the next generation.

    What's the answer? Damned if I know.
     
  9. RAScott

    RAScott Member

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    I get in discussions with my daughters all the time about taxes and tax cuts, the young today feel that the rich should pay more taxes and i said that they do, they feel that they can afford it.
    I like you inalogy of the situation, it puzzles me that this country has become so hate driven of success, the basic fundimental foundation that this country was founded on.
    If you are successful it is now it is a bad thing.
    The young dont make allot of money at this time, fast foward 30 years and see if they still have all of their same beliefs and charity when they are paying the bulk of the taxes.
     
  10. BIGDON

    BIGDON Well-Known Member

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    The bottom line is 2str8 is to ignorant to understand. He believes like many that you can tax your way out of the problems. Just ask the Governor of MI who has been trying for the last 4 years. What has happened to MI is what is going to happen to the Country if the lib is elected. Record high Unemployment, continued loss of jobs, record foreclosures, record number of plant closings and the highest taxes around.

    But 2str8 just keeping preaching and all the little sheep will follow.

    Don
     
  11. Dahaub

    Dahaub Active Member

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    Don't make inuendo and threats to leave this great country. Haul ass. Get your non patriotic ass out of the country and live where they don't pay taxes like we do here. What goes around comes around buddy. While you are out of the country ----stay the hell out of it. Why don't you in all of your wisdom set down some changes in our governmental system so we can all benefit from this wisdom of yours. You know how to make comparison in an economics problem but don't know how to draw up legislation and present it to someone who will help you benefit from it? Stop your bitching and start your doing. People like you have made this site for trapshooters a joke. Dan
     
  12. bigdogtx

    bigdogtx Well-Known Member

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    Tax increases DO NOT increase REVENUE. When Ronald Reagan reduced the top bracket from 70% to 28% REVENUE increased, but congress increased SPENDING more and just added a little more to the national debt.

    There are those who believe that the "rich" should pay more so I can pay less. Do you want to see an exodus of good jobs out of this country? The "rich" live just like you do, just on a different amount, same percentage. Most have a certain percentage of their income for food and shelter, vacations, automobiles etc, but most importantly for savings and investment. Some have worked harder, have a better education, been working longer and now have a higher income. If you raise their taxes, they will not change their outlay for the things they enjoy, just the amount they save and invest. Their investment drives business, creates jobs, your 401(k) match, some contribution to your healthcare. If you raise the taxes a lot of this WILL BE cut back on. Here is an example, if I was "forced" to provide full health care coverage for all full-time employees, I would have to cut employees or cut them back to part-time. Who paid because of this government mandate. You see the rich, unlike our congress, CANNOT spend more than they make.

    2str8, I hope this helps you understand.

    Timb99, the answer is very simple. The government's job, "We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America". If the government would just do this we as a nation would be much better off.
     
  13. Bob Schultz

    Bob Schultz Well-Known Member Supporting Vendor

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    For those who understand, no explanation is needed. For those who do not understand, no explanation is possible.

    True.
     
  14. Chichay

    Chichay TS Supporters TS Supporters

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    2str8,
    Reducing taxes during times of increased deficit is only idiotic to those who do not understand basic economics. Let me try to make it as simple an analogy as possible. When a store wants to increase business, does it raise prices or declare a sale?
     
  15. Bitter American

    Bitter American TS Member

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    I wanted to go to work so I could buy a beer, so I applied for a job from the first four. They said they could not hire me because they had no money. I asked #10 he said he would have hired me but he cant afford to due to paying for the rest of the free beer drinkers. I guess I will just get it for free also.
     
  16. dmarbell

    dmarbell Active Member

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    A dollar today will buy more than a dollar in the future. If we could begin to balance the budget, we could probably sustain the current $9.5 trillion national debt. At 4% growth, the national debt will feel like half this amount 18 years from now.

    Tax policy absolutely influences behavior. Before 1986, home equity lines were not rampant. When the law changed on interest deductions in 1986, home equity lines and the related deductible interest became commonplace. Also, the luxury tax in the 1990s bankrupted many US boat builders, as yacht buyers went offshore. So, lower tax rates do result in higher federal revenues.

    We have spent more than we have taken in, and it got worse under Reagan. Yes, Congress has the final say on spending, but the president presents the budget to Congress. Tax and spend democrats? Or cut taxes and spend more republicans?

    While we're discussing tax policy influencing behavior, let's put some of the myths of the Fair Tax to bed. A national sales tax would not tap the untaxed underground economy, it would create a larger one. Remember, people would have the incentive to avoid paying the sales tax. A national sales tax would not eliminate the IRS, just change it. Retailers would have the extra incentive to underreport sales.

    Danny
     
  17. Dove Commander

    Dove Commander TS Member

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    2str8. I work my ass off. I've done pretty decent. My tax rate is...lets say 29%. What should your tax rate be? It better be 29% too. Why are you better than me? Especially if your a "slacker". There are no "easy tax deductions" since the last tax rules change. You can write some investments off over time, but thats what got the banking system into trouble. Risk. Too many questionable investments not paying off over time. I don't want to stick my willie in the window. There's no advantage. Not when there's a chance of an anti-profit, anti business nominee getting elected. If your so damn brave, start your own business. If your dedicated or smart enough, which I doubt. You are probably another "Give me, give me, give me" guy instead of a worker bee. Well, the worker bees are getting tired of supporting the entire hive. Again, if it's so easy, do it big boy, and let us all know of your success. Can't wait to hear from you.
     
  18. BIGDON

    BIGDON Well-Known Member

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    2str8: try checking out the "less is more theory". It is used every day in business and should be used in taxes and government. You might go and check that Bush's tax cuts actually increased the amount of taxes the Gov't collected. If your "boy" is elected and imposes all the taxes he has proposed then you can set back and watch the mild recession turn into a major recession. I can't believe your creditials of business and that you believe the way you do, you are a phony like your candidate.

    Don
     
  19. Chichay

    Chichay TS Supporters TS Supporters

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    2str8, You remind me of Sammie.
     
  20. highflyer

    highflyer TS Member

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    The taxes that hurt the poor are the taxes for our wonderful left-wing socialist programs. They are the only national taxes they pay. Social Security and Medicare. Soon to be added to those will be national health care which will double what they pay in taxes for the "free" government programs. The states and cities tax us for our other "free" programs like public schools.
     
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